Tag Archives: US Dollar rallied

Technical Read: Gold picked up support today as the GLD bounced off the $110 level. This was to be expected as the previous down move was pretty extreme and placed the market in an oversold situation. I am looking for a trade but my readings are not positive for a buy. My expected returns calculations are very anemic (less than $1!). So the plan for the Mummy is to stay neutral and try to gauge the direction for a profitable move.

Backdrop:

Catalyst 1 – The S&P 500 continues to inch higher after the Nov 3rd pivot point. The chart action is a bit over-extended but there is no clear sign of reversal. My indications are still positive for stocks. This is bearish for gold.

Catalyst 2 – The US dollar is trending up against a backdrop of European deflation fears. In a recent interview (CNBC), Juergen Fitschen (German Banking Association) advised that it was “undeniably that we have slowed down recently” ahead of the anticipated German third quarter GDP release. Apparently the association chair was preparing traders for bad numbers. Germany economic growth is key for the faltering European economy. Serious economic contraction could be a bottomless pit for the world economy. Weakness in the Rhineland would likely spur the ECB to take dovish action, which would weaken the currency (euro) and be bearish for gold (via the dollar). By the way, the yen is having tough slogging against the dollar as well.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: GLD broke down further with just the most nascent sign of a support. The longs were popped pretty hard. The break of the Oct 3 low signals that the trend is down but the gold market is very very oversold making a profitable short trade entry unlikely (the horse has already left the barn) at this point. Gold traders need to be patient and watch for a higher probability entry point.

Backdrop:

Catalyst 1 – OPEC signaled expectation for continued oil price softness in the organization’s annual World Oil Outlook. The expectations of sliding energy prices are helping US equities and covering the Fed’s QE exit. The S&P chart looks good, this is bearish for gold.

Catalyst 2 – ECB President Mario Draghi affirmed the European Central Bank is preparing for further easing action to help EuroLand’s economy. This is bearish for the euro and bullish for the US dollar. This in turn, is bearish for gold.

Catalyst 3 – Another blot on the sunshine of economic growth came this week as the OPEC annual report downgraded expected growth in the “BRIC” countries (Brazil, Russia, India and China). This is another point for global deflation which is also bearish for gold.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

Technical Read: During the second part of the week, GLD (see catalyst 1) really collapsed, despite some initial base building around the 118 level. So what now? From a trend perspective, gold is heading down, however the Wed-Thu-Fri drop has made this market very oversold (we look at things in a trading time frame). Trend down but market oversold readings mean step aside now and wait for an advantageous trade entry point.

Backdrop:

Catalyst 1 – The Fed announced an end to its quantitative easing program Wednesday. This was potentially a destabilizing event but the time occurred during a bout of low oil prices. The energy dividend (tax cut effect) is stepping in to mask the Fed move out of QA. Is Yellan that smart, or just lucky? Stocks broke north of trading resistance in the aftermath. This was bearish for gold.

Catalyst 2 – The US dollar rallied post-Fed and the language in the statement was a little more salubrious than expected. Stronger economy = higher interest rates = more selling pressure for gold.

Catalyst 3 – A moment to ponder, this week we save two highly visible space travel accidents (the NASA space station resupply rocket explosion and later the Virgin Galactic SpaceShipTwo tourism rocket crash). Maybe it wouldn’t hurt traders to be wary of overbought (or oversold) situations.

Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.